Wednesday, March 4, 2015

When Rotherham based MTL Group entered administration last month, it came as a shock to many, but could more be done to help British firms when problems arise with overseas contracts?

Supplying international blue-chip customers such as Bombardier, Rheinmetall and BAE Systems, MTL Group was one of Europe's fastest growing project manufacturing specialists in the metal sector and a global exporter of secondary steelwork. It worked with a global customer base in the defence, construction equipment, rail and off-shore wind energy sectors.

John Sumpton and Hunter Kelly of EY's Restructuring team were appointed earlier this year as joint administrators after the Brinsworth firm encountered difficulties on a large overseas defence contract.

AdvertisementOn appointment of the administrators, a total of 157 employees were made redundant and 146 employees were retained to assist with ongoing operations whilst a purchaser was sought.

The Lancashire-based WEC Group, which comprises 14 companies specialising in welding and fabrication, brought the company out of administration, saving 135 jobs. It funded a partnership deal to acquire the business and certain assets of MTL which will make the group the largest laser cutting operation in the UK's fabrication and engineering sector.

Chartered accountants and business advisers, Hart Shaw in Sheffield is helping one of the creditors of MTL who has a large bad debt and believes that creditors are owed around £10m.

Christopher Brown, business recovery & insolvency partner at Hart Shaw, explained: "The immediate effect of any insolvency is that creditors suddenly have a bad debt to deal with, and the larger the debt, the more likely that there will be a domino effect, causing otherwise solvent companies to have cash flow problems which could ultimately lead to failure. When the initial insolvency involves such a high profile company as MTL Group the risk of the domino effect only increases."

Wayne Wild, group commercial director at WEC Group, said when the deal was announced: "MTL Group is a really great fit for our business. The company has a great track record, working with big name customers and has an impressive order book, despite the problems it has had."

MTL Group had an order book of more than £20m which has passed on to the new partnership, called MTL Advanced Ltd.

Sarah Champion, Member of Parliament for Rotherham, welcomed the deal but is asking what the Government can do to protect and support business when problems occur. She said: "I am still concerned that there is a vulnerability with our businesses when an overseas order does not get paid. I will raise this with Vince Cable as it is clearly a weakness we as a country need to address.

"It is important that all firms meet their obligations. This is especially necessary in cases such as the MTL Group, where the inability to fulfil a contract had such a devastating effect. The fact that a buyer was found relatively quickly show it was always a viable business. It is vital that the Government does all it can to protect British jobs."